EU carbon prices broke and held above a key technical resistance level around €5.50 on Monday to reach their highest in 10 weeks.
The Dec-16 EUA contract settled up 3% or 16 cents at €5.58 on ICE, easing back from an intra-day peak of €5.62, a level not seen since Feb. 5.
Turnover on the benchmark futures was strong at 17.1 million, representing more than 90% of the total volume changing hands on ICE.
Prices had ticked higher after the EU’s spot auction at 0900 GMT cleared two cents above market at €5.42, though bid coverage was below average at 1.88.
Analyst Bernadett Papp at brokers Vertis said in weekly blog that prices could be supported this week due to lower auction supply and buying interest from small installations seeking to square their positions ahead of a month-end deadline for 2015 compliance.
EUA auction supply drops by a fifth to 13.8 million this week, as Wednesday’s sale is replaced by a German sale of 683,000 EUAAs.
Today’s gains followed last week’s 4.6% rise, with a spike in oil prices on Friday helping carbon over the previous resistance around €5.35-5.37.
Clive Lambert of technical analysts FuturesTechs identified €6.19 and €6.36 as the next technical resistance targets following today’s “clear break” of €5.49.
Traders at Redshaw Advisers said that a close above that level increased the likelihood of further gains, but warned that prices were already above levels predicted by some analysts as this year’s average price.
“With compliance buying expected to continue for the next few weeks and one less auction this week, there are supporting factors for carbon prices,” they said in a weekly note to clients, pointing to €6 as the next target.
Energy markets also gave a slightly bullish signal for carbon on Monday, as German clean dark spreads inched higher to claw back some of the previous session’s fall. Though they remained down week-on-week.
Key energy contracts rose in sympathy with oil, with Brent crude hitting a four-month high of $43.06 a barrel on hopes that a producer meeting this coming Sunday would lead to a freezing of output levels.
Meanwhile, Liberal MEP Frederick Federley said that he will publish on Thursday his initial draft report for the industry committee on the European Commission’s post-2020 EU ETS revision proposal.
The committee has joint competence with the environment committee on some issues of the bill and is around two months ahead in its scheduled passage. It is next due to debate the bill on May 23.
By Ben Garside – firstname.lastname@example.org